GBP/USD Under Pressure ahead of BOE Interest Rate Decision
GBP/USD Fundamental Analysis
The currency pair GBP/USD lost most of its previous daily gains on Thursday. The USD Index dropped massively on Wednesday after the US Federal Reserve announced a less-hawkish monetary policy. The US Dollar Index (DXY), which measures the value of the greenback against the basket of six major currencies, dropped from 102 level to 100.60 level after this announcement.
The US Federal Reserve stretched interest rates in line with the expectations on Wednesday, which strengthened the demand for risk-sensitive currencies. The improved market risk appetite helped the British Pound gain strength again the greenback. However, today, the US dollar has recovered some of its previous losses as it has reached around 101 level.
Furthermore, the market participants have now taken off the eyes of the US Federal Reserve, and now the focus has shifted towards BoE’s decision. Bank of England is expected to announce its interest rate decision in the latter part of the day. Inflationary pressures in the UK are still high as the reduced energy prices have been offset by rising food prices and high employment bills.
UK inflation figures with still double digits show that the Bank of England will keep raising interest rates at a higher pace. Some analysts even believe a 50bps rate hike in the upcoming meeting of BoE. The British Pound is experiencing selling pressure ahead of the BoE’s rate decision on Thursday.
GBP/USD Technical Analysis
The technical outlook of the H4 chart of GBP/USD shows that a descending triangle is formed. Currently, the price is moving near 20-Day Simple Moving Average (purple line) at 1.23480. The current outlook suggests that the price will go down towards the support level of 1.23005. The 100-Day Simple Moving Average (blue line) at 1.231084 will provide immediate support to the forex pair. Any break below the H4 Demand Watchzone could trigger massive bearish pressure towards the weekly demand level of 1.20630.
In the bullish scenario, if the pair manages to hold the current support level at 1.23005 and moves above, it would face first resistance at 1.23955. Any break above 1.24430 could push the prices even higher towards the weekly supply zone.
Meanwhile, the Stochastic Oscillator is suggesting the currency pair GBP/USD might continue moving downside for the time being. Whereas the Williams %R is moving in the mid-level, giving mixed signals. The pair’s next momentum depends on the upcoming Bank of England’s rate decision, which is due in the next 60 minutes.
Daily Technical Levels
Pivot Point: 1.2348